Another Chilean Interest Rate Cut Despite Higher Inflation

March 13, 2014

The Chilean monetary policy rate was sliced by 25 basis points to 4.0%.  Similar-sized reductions were made last month, in November and October 2013, and January of 2012.  A statement from the central bank Board discusses both a loss of economic strength recently and rise of inflation in February, the latter caused by peso depreciation and higher energy and food costs.  Previous statements said it might be necessary to stimulate further, while the forward guidance this time leans toward easing in a more qualifying way:

The Board will consider the possibility of making additional cuts to the policy rate in line with the evolution of domestic and external macroeconomic conditions and its implications on the inflationary outlook. At the same time, the Board reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the policy horizon.

The policy rate was slashed between January and July of 2009 from 8.25% to 0.5% but then raised between June of 2010 and June of 2011 by 475 basis points to 5.25%.  Five cuts later finds the rate settled at 4.0%.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.